January 25/06 2:45 am - The Impact of Conservative Government on Global Safeguard Tariffs?

Posted by Editor on 01/25/06

New Government and Global Safeguard?

The election of a new Conservative government may have an impact on the implementation of Global Safeguard Recommendations for imported bikes. Readers will remember that last September the CITT (Canadian International Trade Tribunal) recommended that the Canadian government put in place a 30% duty on all bicycles with an FOB value on or below $225 Canadian. According to the CITT this would translate into a retail value of no more than $400 Canadian.

The goal was to offer protection to domestic manufacturers (ie, Procycle and Raleigh Canada) who had lost significant market share in this opening price point sector of the market - specifically, the mass market (Canadian Tire, Walmart, Zellers, etc.). The Canadian IBD (Independent Bicycle Dealer) channel (suppliers, retailers and BTAC) argued that an FOB price of $225 translated into significantly higher retail prices (up to $1,000), and would have a devastating impact on their businesses.

At the time the election was called, the Recommendations were still sitting on the Finance Minister's desk (who can reject, modify or implement the recommendations). Now, there is a new party in power - who still have to decide how to deal with the issue.

Analysis of the situation suggests some troubling possibilities for the IBD channel. First, both domestic manufacturers are in Quebec, and the Conservatives have been courting Quebec heavily. Second, the Liberal MP for Beauce (where Procycle is based) was defeated, and replaced by Maxime Bernier, a Conservative. Bernier is a founding member of the Montreal Economic Institute, a right wing think tank with connections to the Fraser Institute, and is considered to be a frontrunner for a Cabinet spot.

While one would expect the Conservatives to be in favour of open and free trade (ie, not implementing duties), it may be politically expedient to show that they are willing to protect local jobs (and reward voters for unseating the Liberals). An additional factor is that the Bloc Quebecois for Shefford (where Raleigh has their factory), Robert Vincent, was re-elected. If the Conservatives are looking for BQ support then the Safeguard Recommendations could become a negotiating point.

The bottom line is that this decision has not been made, and that interested parties should be approaching their MPs to register their concerns on the situation. To find out who your MP is, use the links below (note: results are not yet official, so new MP information is limited).

On a related note: three companies have launched legal actions to have the Recommendations sent back to the CITT for revision - Specialized Bicycles, Canadian Tire and the Retail Council of Canada (representing Walmart and other mass merchants). None of the actions gone before a judge yet.